Ploughing through the 278 pages of the forthcoming Audit Committee report pack my heart started to sink. Internal Audit carry out reviews of various services and in the latest report 11 of the 20 systems audits received only “limited assurance” opinions including:
•Parking – permits and vouchers
•Contract management – EPR
•Data quality of Human Resources performance indicators
•Value for money – facilities management
•New Homes Bonus
•IT review of LiquidLogic (Children’s Services) and
•IT penetration review
The report on Contract Management – Environment, Planning and Regeneration made particularly painful reading with quotes such as:
•All officers interviewed confirmed that they had not received contract management training in the past two years;
•Officers queried about contract variations were unclear about the specific Contract Procedure Rules (CPR) requirements for variations confirming a need for development / training in this area.
•Officers interviewed for 5 of 6 contracts confirmed the lack of a formal contract risk log, documenting risks relating to contractor delivery and performance. This was consistent with a review of the JCAD risk register (the Council’s risk management system) which did not consistently reflect risks relating to performance and delivery by the relevant contractor. In particular, there was no documented risk in JCAD for review and assessment linked to the decision to cease monthly progress meetings (including KPI discussion) for the one contractor with an annual value of £30m.
•Officers interviewed for 5 of the 6 contracts confirmed that there were no formal documented business continuity plans to address delivery failure by the contractor (although some officers stated that informal business continuity arrangements existed)
•There was not always formal record of meetings held reflecting KPI output and discussions, and resulting actions that were agreed within the meetings;
•The management and the officer responsible for the administration of the EPR contracts register confirmed that central EPR processes for identifying contract management arrangements in the contracts register and reviewing for compliance were planned but had not been implemented;
•Central EPR processes for using the contracts register for the timely assistance of contract managers in initiating procurement for terminating contracts were planned but had not been developed, this had however been partly mitigated by the Council-wide work on the central contracts register and Forward Plan that resulted;
•The documentation of formal procedures/protocols for the administration of the EPR contracts register was planned but had not been completed;
•Arrangements for identifying variations to contracts needed to be developed and implemented; and
•Instances where noted where purchase orders were not raised prior to the invoice.
On Value for Money – Facilities Management there was one high priority finding and five medium priority findings including:
Contract Management of Leases
There is a lease in place, for Building 2 Lower Ground Floor, and the lease contract has not been signed, despite the Council starting the tenancy in January 2008. In addition, this and two additional leases were identified against which some of the rents and service charges had not been billed since the start of the lease in January 2008. A provision had been made for these costs for £190K covering 2009-10 and 2010-11, this is to be increased to £310,000 for 2011-12. We had estimated the cost at the time of the audit was £590,000, against the payments of £257k since 2009-10 the accrual appears reasonable however in the absence of correspondence from the lessor could not confirm appropriate provision had been made.
Monitoring of Invoices
In a sample of five invoices, none were evidenced as reviewed by the Chartered Surveyor for appropriateness as required by Council procedure. Management confirmed that an invoice would only be reviewed in practice if there were queries around it. Management confirmed an annual process is performed to reconcile invoices received against the leases. This had not been performed at the time of audit, and the planned frequency (annually) means that issues may not be identified and resolved in a timely manner, nor is it appropriate for good budget management.
Meetings with Leaseholder
Only two meetings could be confirmed as occurring during 2011-12, despite the requirement for them to be held every six to eight weeks by Council procedures during 2011-12. Management confirmed that meetings and correspondence occur on a more frequent basis, but that this was not part of a formalised regime, and it was more reactive than proactive.
Three Year Budgeting: Planning
Management confirmed that budgeting was performed on an annual basis for Facilities Management with no active consideration of the longer term financial impact of operations. Given the size of the operational property portfolio and the cost of Facilities Management, it would be useful to profile the budget for a longer period.
Three Year Budgeting: Monitoring
Budget monitoring performed on a monthly basis. The budget monitoring reports for July 2011 and November 2011 were reviewed, and neither included comments to explain the variances against budget.
Key Performance Indicators (KPIs)
There are currently no KPIs in place in Facilities Management against which to monitor performance. Management confirmed that this issue has been identified and a set of KPIs is being developed; however, this could not be corroborated at the time of audit.
On Parking the following was noted:
•There has been a failure to retain permit application supporting documentation for sufficient time period, in accordance with the Records Retention & Disposal Guidelines, or in a structured manner. As a result of this finding we were unable to review the effectiveness of the controls in operation as an audit trail only existed for 3 months and the filing of records for the three month period was completed on an ad hoc basis.
•The controlled stationery (scratchcards and permits) is kept in multiple locations, with loosely controlled access, we also could not verify that stock was counted and reconciled periodically.
•Whilst procedures exist, they are not currently up-to date and it is not clear when they were last reviewed.
•Changes to the Civica parking system in terms of permit values, discounts or property addresses for example are not made through a formal change control process for the Civica system. In addition, there is an ability to create a new account or issue a discount without appropriate authorisation.
•There is not currently a formal service level agreement between the Customer Service Organisation (CSO) and the Parking Service.
•Within our audit sample there were instances where the daily cash-up reconciliation were not independently checked and evidenced as such.
•There are currently unexplained differences between the parking system and SAP income reconciliations which have not been followed up promptly or resolved.
This makes pretty gruesome reading and worries me significantly. Finally, at page 251, we come on to the report of Contract Procedure Rules. This also provides limited assurance and flags up the following issues:
Although a training package for contract management has been developed, and there are minor amendments to be made to bring it fully in line with the CPRs, it has not yet been rolled out to relevant staff members. Without consistent training delivered to all staff members who are involved in procurement, the CPRs may not become culturally embedded within the Council.
Controls and Monitoring Action Plan:
New contracts: 20% of our sample of new contracts tested could not be verified as compliant with CPRs. This was because the contracts could not be obtained/located.
10% of our sample of contracts tested were still non-compliant, despite being recorded as compliant. Additionally, 80% of contracts within our sample were waived in order to become compliant. Whilst the option to waive is in accordance with the CPRs, this should be used as an exception to the rule; the Council should consider whether the CPRs provide the necessary framework to enable compliance, however training should start to address knowledge gaps across services.
In 80% of the sample of cases we tested there was not an appropriate level of authorisation evidenced and recorded on the new vendor form. Of these, 62% were not authorised through the correct form, rather this was achieved by email.
There are limitations with the reporting in place for the completeness of the contracts register, meaning management cannot easily assess their data spend for the current financial year, it currently covers 3 year historical spend but doesn’t indicate where there is current spend. Additionally, there are still some contracts not added to the corporate repository for contracts without valid reasons. We do however note that managers do have access to SAP spend reports, reports extract spend by vendor, year, category which is an improvement from our previous reporting in December. Training is now available on these through the E-portal.
Retrospective purchase orders:
There has been a negative direction of travel, with a high percentage of retrospective purchase orders being raised in February 2012 when compared with the rest of the year.
Personally I found this report shocking and I am sure many other residents would also agree. My concern, which I have expressed on previous occasions, is that Senior Officers care much more about implementing One Barnet than ensuring the day to day operation of the council is carried out properly. How much longer will this go on before Cllr Cornelius gets a grip on how the council is being run. Perhaps he planned to do it but never got round to implementing it!